Securities Criminal Roundup: Mail Fraud Charges Against Investment Company Owner, Ex-Bank of the Commonwealth Execs Convicted, Broker’s Elder Financial Fraud Sentence is Affirmed, and Ex-Fund President Goes to Prison for Ponzi Scam
Flatiron Systems LLC Owner Pleads Guilty to Mail Fraud
In United States v. Howard, investment company owner David Eugene Howard has pleaded guilty to mail fraud charges. He is accused of engaging in a financial scam that obtained about $1.8 million from investors.
Prosecutors say that Howard, who owns Flatiron Systems, used operating agreements, letters, and account statements to make false representations that his company used a proprietary system named “Pathfinder” to trade pooled equity accounts. The Securities and Exchange Commission has submitted an enforcement action against Howard.
Three Ex- Bank of the Commonwealth Executives Get Fraud Conviction
Edward Woodard, his son Troy Woodard, and Stephen Fields, three former Bank of the Commonwealth executives were convicted on charges related to their alleged scam many believe was the cause of the bank’s demise in 2011. Convicted along with them is Dwight Etheridge, a favored borrower.
The federal government says that starting in 2006 the bank took on high-risk deposits to try to expand the business’s geographic base. By 2008, a lot of the banks’ loans were purportedly administered and funded in a manner that ignored the bank’s internal controls, as well as industry standards. Edward and Fields are accused of disguising the bank’s financial state.
Ex-MetLife Broker’s Criminal Sentence for Elderly Fraud is Affirmed by 7th Circuit
An appeals court has affirmed the 210-prison sentence that Victoria McGee Harris, an ex- MetLife Inc. (MET) broker, received after pleading guilty to criminal charges accusing her of stealing millions of dollars from her clients (primarily elderly seniors). Harris diverted these investors’ funds eighth years, purportedly using the money for her personal spending. MetLife settled with Harris’s clients by paying them over $7 million.
Appealing her prison sentence, Harris had said that its duration was unreasonable and that the district court acted improperly by counting married couples as two separate victims for the purposes of determining her prison term. The 210-month sentence she received is at the top of the guideline ranges. However, the Seventh Circuit found that the district court did not err when determining the sentence length.
Ex- Wasson Capital Ltd. Present Gets 30 Months in Prison for $2.3M Ponzi Scam
In United States v. Sekaran, the U.S. District Court for the Southern District of New York sentenced ex- Wasson Capital Ltd. president Anand Sekaran to 30 months behind bars for his involvement in a $2.3 million Ponzi scheme. Sekaran must pay $2.26 million in restitution, $2.3 million in forfeiture, and a $200 special assessment fee.
Sekaran is accused of soliciting about $6 million from clients for call and put options. However, when the investments began failing, he didn’t tell investors. The government said that instead, he misrepresented the health of the investments, misrepresented to clients how their money was being used, misappropriated approximately $500,000 and caused investors to lose some $2 million. In addition to entering a guilty plea, Sekaran and his firm settled the related civil case against them.
The SEC's Order Against Howard (PDF)
Ex-Virginia bank executives guilty in financial crisis case, Reuters, May 24, 2013
Wasson Co-Founder Sekaran Gets 30 Months for Fraud, Bloomberg, May 29, 2013